A blog about economics, finance, business and corporate governance. My background is in economics, with degrees from Columbia and Johns Hopkins. A career in international development, equity capital markets and as a corporate finance chief and board member lead me to think about events in a different way--hence the blog's name.

Thursday, June 14, 2012

Rumsfeld's Unfortunate Rhetoric on LOS Treaty

Donald Rumsfeld was Secretary of Defense from 1975-1977. I was working at the United Nations at the time, and my team was part of a much larger group working for the Third United Nations Conference on the Law of the Sea. My team was focused on technical issues in creating an economic regime for exploiting subsea mineral resources beyond national jurisdiction, what was to be called the "Area." At the time, the interest was on deep ocean manganese nodules, and there was a lot of excellent work being done by international research groups at Scripps Institution of Oceanography, CNEXO (Fr,) among many other research groups. I recruited an researcher from Scripps to build own my team's technical expertise. The promise of an orderly international legal and economic framework to develop these resources peacefully, was really an exhilarating prospect.

Our foreign policy regarding the economic regime for the deep seabed was handed over to a narrow cabal of corporate interests, led by executives from Kennecott Copper, which today is an operation within Rio Tinto. The rhetoric in all the speeches, official and unofficial communications talked about redistribution of wealth, socialism, paralyzing regulation, abdication of national sovereignty and so on. It's absolutely laughable to see this same language being resurrected today in a Wall Street Journal editorial from former Secretary Rumsfeld on June 13th. Reading this editorial, it's as if Secretary Rumsfeld has just emerged from a time capsule that he entered in 1977. Lots of things have changed since then, largely to the detriment of our strategic options in the future.

The rise of China as a global superpower with economic, military and strategic goals distinct from our own is something that was not on our policy radar at the time. We have written about China's claims in the South China Sea causing problems for some of our prospective partners and allies in the region. Much as we rightfully celebrated the fall of Communism, Russia sees itself as a global economic power with grand visions.. Russia has aggressively used the international vacuum on marine territorial issues to stake problematic claims in the Arctic Circle.

The U.S. military brass, as opposed to our politicians, have been paying attention. Admiral Samuel J. Locklear III, head of the U.S. Pacific Command told the Senate Foreign Relations Committee, "Competing claims in the maritime domain by some coastal states are becoming more numerous and contentious. Some of these claims, if left unchallenged, would put at risk our operational rights and freedoms in key areas of the Asia-Pacific,"

Our future budgetary realities, especially factoring in a health care time bomb in the wings, are dictating a smaller, more agile military, aided by a lot of technology like drones and robots. We're contemplating the next Afghanistan. Instead, what is going to be required in the Pacific and in the Arctic may be something quite different. Operations in these areas will be budget busters.

Failing to ratify the LOS treaty has left us without any avenue for internationalizing a discussion about maritime boundaries. China and Russia don't have any incentives to abide by any such international framework either. Our only option is to somehow project our military power over a huge, dispersed, and territorially complex theater that includes land, sea, the sea bed and ice. Our Navy will face shortages of both human capital, leadership and ships.

Even former Secretary Rumsfeld isn't blind enough not to acknowledge this reality, "The most persuasive argument for the treaty is the U.S. Navy's desire to shore up international navigation rights. It is true that the treaty might produce some benefits, clarifying some principles and perhaps making it easier to resolve certain disputes. But our Navy has done quite well without this treaty for the past 200 years, relying often on centuries-old, well-established customary international law to assert navigational rights. Ultimately, it is our naval power that protects international freedom of navigation. This treaty would not make a large enough additional contribution to counterbalance the problems it would create." I don't believe that our military leadership would agree with the former Defense Secretary's position. His cost-benefit analysis is also suspect.

There's no doubt that being involved in a truly global international treaty framework like the LOS will be messy, irritating, highly political and inefficient. Business as usual may be far worse. The bottom line is that we can't solve our future strategic geopolitical problems solely through a projection of our military power. To assume so would be irrational and naive. As the late President Reagan said, "Don't be afraid to see what you see."